“The inequality in retirement wealth in our country is both persistent and extreme,” said Teresa Ghilarducci, director of SCEPA’s Retirement Equity Lab. “Yet, unlike income inequality which is distorted by skyrocketing incomes for the 1%, inequality in retirement wealth reflects the bottom falling out for low and moderate earners."
Using survey data matched with tax records, this study finds striking levels of retirement inequality within lifetime earnings groups as well as growing disparities between earnings quintiles. "These results are a call for action to address the needs of those most disadvantaged by the failings of the U.S. retirement system," Ghilarducci added. "To ensure everyone access to retirement, policy makers need to expand Social Security and create Guaranteed Retirement Accounts.”
Retirement Inequality Persists
- In both 1992 and 2010, workers in the top 20% of the earnings distribution held about half of all retirement wealth, whereas the bottom group's share fell from 3% to 1%.
- Sharp inequalities also persist within earnings groups, reflecting a retirement system that fails both low and high earners. In each lifetime earnings quintile, the top 10% of savers consistently held 10 to 20 times the retirement wealth of the bottom 10% of savers.
The System Fails Everyone, But The Floor is Collapsing
- Median retirement wealth falls 84% short of what people would accumulate if they saved 6% of every paycheck with a 50% employer match and no leakages.
- Among workers in the bottom fifth of the earnings distribution, the share of those with no retirement wealth increased from 45% to 51% between 1992 and 2010.
- Wealth-to-earnings ratios are used to determine if people are financially prepared to retire. These rates fell for the lowest earnings quintile between 1992 and 2010.
Policies to Address Retirement Inequality
- Strengthen Social Security
- Create Guaranteed Retirement Accounts (GRAs), professionally managed accounts on top of Social Security that are funded by employer and employee contributions, paired with a refundable tax credit, and provide monthly benefits for life.